Weekend - BoE's Mann says price caps on energy could be boosting other inflation

Bank of England Bank of England The Bank of England (BoE) functions as the United Kingdom’s central bank and is one of the key drivers of monetary policy in Europe. As one of the world’s oldest central banks and established in 1694, the BoE is owned by the British government. Its central mandate involves maintaining and targeting interest rates while using other tools to help either stimulate or contract the economy. Moreover, the BoE is responsible for producing the UK’s bank notes as well as supervising key bank payment sy The Bank of England (BoE) functions as the United Kingdom’s central bank and is one of the key drivers of monetary policy in Europe. As one of the world’s oldest central banks and established in 1694, the BoE is owned by the British government. Its central mandate involves maintaining and targeting interest rates while using other tools to help either stimulate or contract the economy. Moreover, the BoE is responsible for producing the UK’s bank notes as well as supervising key bank payment sy Read this Term Monetary Policy Committee member Catherine Mann spoke over the weekend.

As part of a panel discussion at the annual conference of the American Economics Association in New Orleans.

Mann argued that holding down the price of energy allowed consumers to spend on other goods an services:

• “The caps on energy prices allow the reorientation of spending to the rest of the consumption basket and thus potentially higher inflation than otherwise would be the case in all those other products”
• “That’s something we look at carefully.”

Mann continued, outlining concerns even when caps are removed:

• “What’s going to happen when the caps are removed?”
• “Will inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term kind of bounce back? What will the energy prices be at that time? We don’t know.”

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Seems to be looking for worries. Sheesh. Surely if price caps are removed and energy prices bounce back higher, then consumer spending elsewhere and therefore inflation pressures on other goods and services would decline ... that'd fit with the reasoning, yeah?

Bloomberg had the report, gated.